Poor growth in EU’s biggest economies slows recovery

GDP figures for Germany, France and Italy unexpectedly weak as uncertainty prevails

THE eurozone’s nascent recovery appears to be stuttering.

Growth figures released yesterday showed that the currency bloc performed worse than expected in the second quarter. Eurozone output rose by just 0.3pc in the period according to Eurostat, a shallower gain than the 0.4pc quarterly expansion hoped for by City analysts, and slower than the first quarter’s 0.4pc expansion.

Despite the arrival of a €1.1 trillion (£800bn) European Central Bank quantitative easing scheme and lower oil prices, the eurozone lost steam, with weak performances from some of the bloc’s largest economies.

The figures underlined the uncer- tainty surrounding the eurozone’s slow recovery, still characterised by doubledigit unemployment rates, perilously low inflation, and uneven growth rates across the bloc.

GDP figures for three of the union’s big four economies – Germany, France and Italy – were all unexpectedly weak. Carsten Brzeski, of ING, said: “Normally, such a cocktail of strong external steroids should have given wings to the economy. This is not the case.”

France stagnated in the second quar- ter as household spending slowed and business investment contracted.

Zero growth in the French economy in the three months to June followed an expansion of 0.7pc in the first three months of the year. This was revised up from an initial estimate of 0.6pc. The second quarter figure was lower than the 0.2pc expansion predicted by economists.

INSEE, France’s statistics office, said the marked deceleration was driven by a sharp slowdown in consumer spending, which grew by just 0.1pc during the quarter, following growth of 0.9pc in the first three months of 2015.

Public and private investment slowed, and INSEE said domestic demand contributed just 0.1 percentage points to GDP growth in the second quarter, which was much lower than the 0.6 percentage points contribution in the previous three months.

Michel Sapin, the finance minister, said France remained on track to reach its growth target of 1pc this year, with the “rhythm of growth” expected to pick up to 1.5pc by the end of 2015. But analysts suggested that the Frenchman was being optimistic.

It came as official figures showed Germany expanded by 0.4pc in the second quarter, which was slightly lower than estimates for growth of 0.5pc.

The ECB’s QE programme, which has helped to weaken the euro in recent months, boosted German exports in the second quarter. “Exports of goods recorded a particular increase compared with the previous quarter,” Destatis, the German statistics office, said in a statement.